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Marvell says audit committee finds no accounting fraud

(Reuters) – Chipmaker Marvell Technology Group Ltd said an investigation found no fraud in the way the company had booked revenues but pointed out that there was “significant pressure” from the management on sales teams to meet revenue targets.

The audit committee also noted that internal controls were not fully followed and revenue was booked prematurely for some transactions.

Marvell’s shares rose as much as 4.2 percent after the six-month investigation found no evidence of fraud.

However, the committee’s findings raised questions about the management’s operating style, an issue flagged by PriceWaterhouseCoopers in October, when it resigned as the company’s auditor.

Marvell’s Chief Executive, Indonesia-born Sehat Sutardja, co-founded the chipmaker in 1995, along with his brother Pantas and wife Weili Dai, who is now the president of the company.

“At the top there are some very strong figures and some of those figures need to be put in check and hopefully will be,” FBR Capital Markets & Co analyst Christopher Rolland said.

The committee also raised questions about a patent Sutardja had initially claimed as his before passing onto the company.

The patent relates to a technology that substantially reduces the amount of a type of memory needed to run computers and smartphones.

Sutardja personally holds 360 patents.

The company said it was evaluating whether any of the findings were material to any previously reported financial period and that it would shift revenue forward one quarter if needed to rectify the issue.

“It is a step forward but I wouldn’t say they are totally out of the woods yet,” FBR Capital Markets & Co analyst Christopher Rolland said.

The committee said it intends to review certain matters that came to its attention during the investigation and has not determined whether those issues would be material.

The company said in December it had been contacted by the Securities and Exchange Commission and the U.S. Attorney’s Office regarding the probe.

Marvell’s shares were up 2.4 percent at $9.78 on Tuesday morning. They had fallen 9.5 percent since company announced the accounting probe in September. (Reporting by Kshitiz Goliya in Bengaluru; Editing by Saumyadeb Chakrabarty and Savio D’Souza)